By Adedapo Adesanya
Crude oil prices fell on Wednesday after the United States Energy Information Administration (EIA) reported an inventory build of 16.3 million barrels for the week to February 10 compared with a build of 2.4 million barrels for the previous week, extending a string of weekly builds, some of them quite sizeable, which have pushed inventories above the five-year seasonal average.
Consequently, Brent futures slid 20 cents or 0.2 per cent to $85.38 a barrel, while US West Texas Intermediate (WTI) crude fell 47 cents or 0.6 per cent to $78.59 per barrel.
A day before the EIA reported its weekly inventory estimates, oil prices dropped following the American Petroleum Institute’s inventory estimate, which saw a sizeable build of more than 10 million barrels.
After the API report, the administration’s figures came as no surprise, although the size of the estimated build was the largest in more than a month.
Pressure also came on the black gold as the US Dollar strengthened, signalling that the US central bank could keep monetary policy tight. A stronger Dollar can cut oil demand, making crude more expensive for holders of other currencies.
Federal Reserve officials said the U.S. central bank must maintain gradual interest rate increases to fight inflation. Investors worry higher rates could slow the economy.
The drop could have been constrained by the federal government’s announcement of a sale from the strategic petroleum reserve, which is already at a 40-year low.
Another limiting factor was the latest CPI report from the US Bureau of Labor Statistics, which showed the rise in prices had slowed down, quenching fears of continued rate hike aggressiveness from the Federal Reserve.
On Tuesday, it was reported that the CPI increased by 6.4 per cent. That was the smallest gain since October 2021 and followed the annual peak at 9.1 per cent in June, which was the biggest increase since November 1981.
Also, the International Energy Agency (IEA) sees oil demand rising by 2 million barrels per day in 2023, with China making up 900,000 barrels per day. That is up 100,000 barrels per day from last month’s forecast to a record 101.9 million barrels per day.
It warned that the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ production could mean a supply deficit in the second half.
“Supply from OPEC+ is projected to contract with Russia pressured by sanctions,” the Paris-based agency said in its monthly oil report.
Dipo Olowookere